Stocks gain with commodities on U.S. budget as Treasuries fall

Thirty-year Treasury yields climbed to a three-month high.

Stocks rallied, sending the Standard & Poor’s 500 Index to a two-month high, and commodities gained on signs of progress in U.S. budget talks. Thirty-year Treasury yields climbed to a three-month high.

The S&P 500 advanced 1.1 percent to 1,446.79 at 4 p.m. in New York, with trading volume 21 percent higher than the 30-day average. Treasury 10-year yields increased six basis points to 3 percent and reached 3.03 percent, the highest since Sept. 17. The S&P GSCI Index of raw materials rose 0.5 percent as energy commodities led gains before U.S. supply data tomorrow. The yen traded near a 20-month low versus the dollar, while Sweden’s krona appreciated against 15 of 16 major peers on speculation the Riksbank is done cutting interest rates.

President Barack Obama proposed a budget plan that would cut about $1.2 trillion in federal spending and raise a similar amount in taxes in the next decade, according to a person familiar with the talks. European Central Bank President Mario Draghi yesterday said ECB policies and governance reforms in the euro area have revived confidence that will help foster a gradual economic recovery.

“There are signs of progress in the negotiation over the fiscal cliff,” Brian Gendreau, a market strategist at El Segundo, California-based Cetera Financial Group Inc., said in a telephone interview. The firm has about $20 billion in assets under management. “People have been very fearful to move into stocks and this might be one of the things to get them go back to stocks.”

Market Leaders

Among U.S. stocks, Bank of America Corp., United Technologies Corp., Hewlett-Packard Co. and Intel Corp. rose more than 1.9 percent to lead the Dow Jones Industrial Average up 115.57 points. American International Group Inc. added 1.6 percent after the insurer raised HK$50 billion ($6.5 billion) from the sale of its remaining stake in AIA Group Ltd.

Gauges of energy, technology and financial shares rose at least 1.5 percent to lead gains in all 10 of the main industry groups in the S&P 500. An index of homebuilders rallied 2.3 percent as a report showed confidence among U.S. homebuilders climbed in December to the highest level in more than six years. Apple Inc., the world’s most valuable company, advanced 2.9 percent for a second straight gain.

House Speaker John Boehner said he will push a budget “plan B” measure that would include tax increases on income of more than $1 million, while continuing to negotiate with President Barack Obama.

Washington Talks

Obama’s plan would change the inflation measure used to calculate cost-of-living increases for Social Security and raise the income threshold for tax increases to $400,000, from an earlier proposal of $250,000. The deal would also raise the U.S. debt limit for two years and then change the rules to eliminate the need for congressional approval.

Obama and Boehner met at the White House yesterday with days left to avert more than $600 billion in automatic spending cuts and tax increases that go into effect next year if a budget deal isn’t reached.

The S&P 500 has climbed 15 percent this year as the Federal Reserve vowed to safeguard the economic recovery. Europe’s Stoxx 600 has advanced 15 percent in 2012, set for the first annual gain since 2010, amid increased confidence that policy makers are taking control over the debt crisis. The MSCI Asia Pacific Index has risen 12 percent this year. Asia’s benchmark rose 0.5 percent today.

Draghi, testifying yesterday to the European Parliament’s Economic and Monetary Affairs Committee in Brussels, said the central bank expects “a beginning of a recovery in the second part of next year.” The ECB’s commitment to preserve the euro at any cost and the establishment of a single banking supervisor have improved financial-market sentiment, he said.

European Markets

About three stocks rose for every two that fell on the Stoxx 600. Trading was 37 percent higher than the 30-day average, data compiled by Bloomberg show. Trading on Spain’s IBEX was almost three times higher and on the Hang Seng Index of Hong Kong shares it was 125 percent higher.

BHP Billiton Ltd., the world’s largest mining company, climbed 1.2 percent after China’s leaders were said to set a target for the economy to grow 7.5 percent next year. The government also decided to keep inflation at about 3.5 percent, according to two bank executives and a regulatory official who were briefed on the targets.